Abstract

This paper applies the theory of social situations to study whether international environmental agreements (IEAs), mainly those on greenhouse gas emission reductions, can be attained. A game theoretic model is generally a black box for decision makers, where the mechanisms, which lead to solution(s) of the game, are not explicitly pointed out. This paper opens this black box by making the (institutional) move rules explicit. The usual pessimistic outcome with an ineffective and small size of stable coalitions among world regions is countered. Our model challenges conventional wisdom in the sense that large coalitions are possible outcomes of the cartel game, namely by incorporating: (1) farsightedness, and (2) coalitional moves with commitment as an alternative to myopic and individual moves which characterise the cartel game. We show that even if the international negotiations on climate change mitigation are modelled as an n-person prisoner's dilemma, one cannot rule out cooperation among world regions as a solution of the game. Indeed, in most analysed situations the grand coalition is among the solutions of the game. This shows that predictions based on cartel stability may be too pessimistic if it comes to analysing incentives to cooperate in implementing international environmental policy. Moreover, in an empirically calibrated model, we find three out of six instances where Russia (with or without the US) has an incentive to sign the Kyoto protocol.